BUENOS AIRES—
Norma Lavorato
worked and saved for decades, but has spent most of her twilight years waiting for the Argentine government to pay back the $45,000 she invested in sovereign bonds and lost in Argentina's massive 2001 default.

"I've had patience, a lot of patience," said Ms. Lavorato, a spry 85-year-old who turned down the small settlement offers the government made to other bondholders. "I worked for 43 years. That money is mine."

On Monday, an Argentine delegation is set to arrive in New York to meet with a mediator in its dispute with holdout bondholders led by a small group of creditors. But it isn't just the $1.5 billion owed to hedge funds Elliott Management Corp., Aurelius Capital Management LP and Olifant Fund Ltd. at stake. There are also hundreds of smaller funds and pensioners as far away as Europe, who are claiming much smaller amounts—and who also have stood their ground to recoup their investments in full. "We saved a lot, my sisters and I," said Ms. Lavorato. "We've waited all this time for the money."

The plights of individuals like Ms. Lavorato have been largely forgotten in Argentina's public and bitter battle with the big U.S. hedge funds. Much of the hedge funds' Argentine debt was snapped up on the cheap after the default, with the idea that it would increase in value. But many bonds were also sold beforehand to ordinary Argentines. They saw government debt as a secure investment.

Those investments vanished when Argentina defaulted on some $100 billion in 2001. Most holders of the soured bonds eventually accepted debt exchanges offered by the government in 2005 and 2010, which paid roughly 33 cents on the dollar. These swaps accounted for 93% of all the debt that was eligible for exchange.

Holders of the remainder have waited for a better deal, earning public recrimination from the Argentine government, which has cast them as greedy capitalists out to take advantage of the country.

"We won't give our homeland to vultures who want to rip it apart," President
Cristina Kirchner
said in a June speech.

The dispute reached a new phase last month when a U.S. district court judge blocked Argentina from making interest payments on some of its bonds unless it pays the hedge funds at the same time. The clock is ticking: Argentina has until July 30 to pay before it enters into a new default. Analysts say that is why the country agreed to meet with the mediator, a court-appointed lawyer, this week.

Ms. Lavorato doesn't see herself as a vulture. But she is among the 13 individual creditors, along with the hedge funds, whose U.S. lawsuit is subject to the judge's ruling. That means if Argentina makes a payment to the hedge funds, Ms. Lavorato should get paid, too.

A deal this month also could pave the way for subsequent settlements with hundreds more holdouts. Those include other Argentine citizens, as well as Italian and German pensioners who sunk their savings into Argentine bonds before the default.

The scolding of holdouts vexes citizen bondholders like 57-year-old
Horacio Vázquez.
Mr. Vázquez, who started a group representing the individual holders, said they have been referred to as "little vultures" in the local press, with a recent article on Mr. Vázquez by a pro-government news outlet, Tiempo, linking to a Youtube video of a fluffy, vulture chick. The site also published a piece titled "These Are the Argentines Who Are on the Side of the Vulture Funds," naming Ms. Lavorato and her 89-year-old sister, among others.

"We are discriminated against by the country that caused the problem, and still we haven't received our money," said Mr. Vázquez, an electrical engineer who lost $73,000—and his job—following the default.

A spokeswoman for the country's Economy Ministry declined to comment on the case and small-time debtholders. She referred to statements by Argentine officials that the country has always been willing to negotiate if the conditions are fair. However, the government has expressed concern that any settlement with the funds could trigger a landslide of new claims.

Economists, legal experts and government aides estimate it could cost $12 billion to $15 billion to pay holdouts. The government says there is a risk of additional claims of up to $120 billion by investors who participated in the debt restructurings—a price it can't afford.

Economic and political troubles here are growing, with the country mired in recession and international reserves falling from $53 billion in January 2011 to $29 billion. And recently, Vice President
Amado Boudou
was indicted on bribery and influence peddling charges.

Others say that settling with holdouts could be beneficial, as it would give the cash-strapped country access to financial markets for the first time since 2001.

"This has been a lingering issue for so many years, so paying would be good for its international reputation," said
Louisa Richey,
a senior consultant at Cefeidas Group, a risk-advisory firm in Buenos Aires.

For people like
Maria Elena Corral,
77, the issue has lingered for too long. During more than four decades as a secretary, she squirreled away $65,000 that she put into bonds and lost in the default. In the years that followed, she consulted lawyers and wrote letter after letter to officials asking for her money back.

"They didn't pay any attention," she said.

She resisted the exchange offers when they came, not wanting to give up some 70% of her hard-earned savings. Yet every month Argentina's inflation, estimated by many private-sector economists to be around 30% a year, eats into her modest pension. A friend eventually connected her with law firm Milberg LLP in New York.

Recent news of the judge's injunction "put me in a good mood," said Ms. Corral. "I can't wait another 15 years."

A better deal for people like her could be hard to swallow for the thousands of bondholders who agreed to forgo most their money in the debt exchanges.

One is
Jose Landi,
71, who put $50,000 in bonds after seeing government ads urging Argentine citizens to buy sovereign debt. "I supported my country, but it never paid me," said the Buenos Aires lawyer, who after nine years accepted about 30% of the original amount.

"If those bondholders get back all their money, well, they made quite an effort waiting for so long," he said. "They are luckier than I am."

In her small, tidy Buenos Aires apartment, Ms. Lavorato tends to her bedridden sister and thinks about what she would do with her savings if they are returned: Donate some to the children's hospital where she used to volunteer, perhaps travel abroad. On a recent afternoon, the octogenarian poured a thimbleful of Argentine liquor and made a small toast.